Integrated management system provides benefits
By William Atkinson -- Purchasing, 3/4/2004 2:00:00 AM
Enanta Pharmaceuticals (Watertown, Mass.), a biotech company, began seven years ago with three people. "As a start-up company, we were very short of resources, so we wanted to automate routine business processes as much as possible," explains Michelle Wang, senior program manager.
One opportunity for automation existed in procurement. "When the company started, people were using a home office system to do accounting and purchasing," explains Daniela Trombino, purchasing and safety manager. By the time the company grew to over 40 people, the existing purchasing system had become inefficient and involved a lot of paperwork.
The paper-intensive process required users to search through printed catalogs, write down item numbers, and send e-mails to purchasing to request items. "People would either e-mail me or give me handwritten notes on what they wanted to order," explains Trombino. "Then I would have to duplicate by entering them into our system, then call the orders into the vendors." In addition, there was no way for her to actually monitor whether the orders were received. Errors were also common, because some of the scientists' handwriting on the notes wasn't always easy to read.
To address the problem, Enanta began working with SciQuest (Research Triangle Park, N.C.), a software provider. "We did two phases of implementation for Enanta," says Karen Hiser, vice president of services and supplier enablement. "The first was the supplier relationship management solution, which they adopted in 2001."
"Initially, we looked at several different systems," recalls Trombino. "SciQuest turned out to be the best system for us, because it allowed us to purchase everything we needed directly related to biotechnology." SciQuest maintains an extensive catalog system of suppliers to the industry, and all of Enanta's scientists have access to it. "We used the catalogs SciQuest had on the system, but we were also able to add some of our own catalogs, including office supply and computer vendors, as long as the supplier has an on-line catalog available," she adds.
Wang elaborates: "At first, it just had chemical suppliers on it. However, we talked with a number of our other suppliers, such as those providing office supplies, and SciQuest was able to load their catalogs into their system for us, too."
Enanta still uses some small local vendors that don't have on-line catalogs, and their products must still initially be ordered by hand. "However, once I add these items to the SciQuest system, they remain there, and the next time we order, we can order those specific items from the system," explains Trombino.
While the system provided a number of benefits, the challenge was getting users to become comfortable enough to get into the habit of using it on a regular basis. "Prior to this, they were used to ordering on their own via e-mail and phone calls to the purchasing department," notes Wang. "With this system, they order directly."
Once users did become comfortable with the system, savings and other benefits began to mount. "We have seen an overall savings of about 10% a year on chemicals and lab consumables as a result of the system," reports Trombino.
Orders still come to Trombino, who approves, modifies or rejects them. "For example, if a scientist wants to order something next day and I feel it's too expensive, I might ask the scientist about ordering it second-day," she explains. "If I feel an order is not okay, I can reject it, but that rarely happens." As a result, the system saves her time, because she doesn't actually have to fill out the order. "I just review it and either approve it or make changes to it," she says.
With this extra time, Trombino can spend more time negotiating with suppliers and gaining additional savings this way. For example, with the reports she gets, she can see where the company is spending the most money and then work with the salespeople to negotiate additional savings.
Trombino can also prioritize suppliers based on preferences. "For example, we are members of a regional biotech council, and all of the members get discounts from certain preferred vendors," she explains. As such, when scientists are running searches, they will be guided to purchase items from the highest priority suppliers.
Example: "One salesperson may tell us that we purchase a lot of alcohols from his company and then offer us 25% savings on alcohols, but charge us full price for everything else," relates Trombino. "I can check our system and see whether that's the case or not."
Another benefit that Wang likes in particular: "This is a hosted system, so we don't have to devote a lot of resources to it from an IT perspective," she says.
In sum, according to Hiser, the system has allowed Enanta to gain greater visibility into its spend, drive additional contract savings by directing users to purchase from preferred suppliers, and analyze spend data to look for additional contract savings opportunities.
With the success of the supplier relationship software well in hand, Enanta began to address another chronic problem. With more than 5,000 chemical containers in inventory, the process of receiving, transferring and disposing of the containers was a challenge. At least 10% of all materials were missing from inventory at any one time, and three separate systems were required for receiving materials. Infrequent updates led to unreliable information. To address this concern, Enanta began to show some interest in SciQuest's integrated materials management system, called SelectSite, which integrates procurement and inventory management. "Once they achieved savings with their external spend management, they came back to us in late 2002 and asked us about our materials management solution, to help them with gaining greater visibility and control over their internal chemical inventory," reports Hiser.
The system provides an integrated solution that allows users on the front end to reduce their actual purchases by being able to see inventory, leverage what is already in inventory (rather than making a purchase); and then, on the back end, if they do have to purchase from a vendor, being able to integrate that purchasing experience directly back into inventory, so that these items get into the inventory flow. "This is now an integrated module that includes the supplier relationship management piece and the spend control piece, giving them control over the complete cycle from beginning to end," reports Hiser.
Results to date include significant time-savings and productivity gains due to the integrated, automated process; a 10% reduction in spend as a result of being able to search accurate inventory and avoid unnecessary purchases; a 50% reduction in the number of containers requiring waste disposal (which is significant, given that the average disposal costs are four times the cost of the containers themselves); and faster and more accurate reconciliation of stockroom inventory.
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